Re: Does IR35 actually generate revenue?
The point isn't to generate revenue, it's to eliminate fake contractor jobs. Most of the tax dodge issues with contracting were eliminated years ago.
Realistically, we shouldn't have a system where it's cheaper for me to employ a contractor for 10 years on double the rate of regular staff, but we currently do. In these cases, the employer saves on all the benefits and so reduces their bill, and the contractor takes home a fair bit more pay than his permanent colleagues too due to inefficiencies in the tax system (and yes, before many of the 'contractors pay 3% more tax!' people jump in, at some income levels contractors pay more, but at others they pay rather less than they ought to - particularly the lower end. This is intended to protect professionals during slow business periods, given that they then over-pay during good years, but if your take-home pay is always £25k then it's not a 'slow period', you're just underpaying tax for your income rate forever).
Often the low-end contractor in question doesn't particularly want to be a contractor but just isn't given the option of a permanent role by the employer. I was a contractor when I started out on the helpdesk 20 years ago, and 17 year old me certainly wasn't taking advantage of any tax opportunities - I was being exploited by an employer who wanted the option of firing me on a day's notice despite me working for them for 4 years. And yes, my pretax hourly rate was 50% higher than I would've got as a permy, but I was paying an effective 35% tax on under 20 grand a year, so the 20% or so extra money in my pocket at the end of the day wasn't much compensation for no paid holidays, no paid sick leave, no pension and no protections.
The idea is supposed to be this: If you're a genuine contractor, then offset any losses by simply charging your client the difference. It's a business cost and you pass those through to your client, after all. If they actually need a contractor for the work (short-term project, specialist 1-off expertise requirement etc) then they'll pay up because, well, they don't have an option. If what they actually need is a permanent employee but they're looking for ways to avoid paying the full cost for one, then your increased price ought to make the permy a better economic option and so cut the dodgy practices.
Unfortunately, the legislation is drafted poorly and HMRC have done a terrible job of putting it into practice, so what ought to actually be a fairly good idea has arrived as a turd.